Enlarging Price Stabilization Fund scope

Soaring prices of edible oil, pulses, vegetables, and various food items are eating into household budgets and have brought into focus the Price Stabilization Fund (PSF) mechanism which was created to stabile prices of pulses, onion, and potato. States expanding the list commodities covered under the PSF can protect the consumers from seasonal price spikes. The Central Government created the PSF- a corpus of Rs 500 crores- to regulate price volatility through procurement by state or central agencies of selected produce, maintenance of buffer stock and regulated release into the market. The Operational Guidelines released by the Department of Consumer Affairs of the Ministry of Consumer Affairs, Food and Public Distribution in 2016 states that to begin with, interventions would be supported for onions, potatoes, and pulses only, but other commodities may be added later. States have scope to add commodities into the list under PSF to leverage this flexibility in the guidelines. The advantage of the PSF is that that interest-free working capital is advanced to central agencies, the State government and its agencies to undertake such market intervention operations. When retail prices of notified agri-horticultural commodities are anticipated to increase substantially, then their procurement could be undertaken from farm gate/mandi or through import, as decided by the Price Stabilization Fund Management Committee (PSFMC) to reduce the cost of intermediation and made available at a cheaper price to the consumers. For north-eastern states, interest free advances are provided on 75:25 sharing basis between the Government of India and State. The State-level Price Stabilization Fund Management Committee manages the PSF operations. Official data released by the Ministry highlights how PSF utilization has kept onion prices under check compared to last year. The prices of onion remained substantially stable during 2021-22 due to effective market intervention through PSF. Onion buffer of 2.08 Lakh MT built in current year under the PSF has been released in a calibrated and targeted manner to States/Cities where prices are increasing over the previous month and also to source markets such as Lasalgaon and Pimplegaon to augment the availability in these key mandis, the Ministry claims, adding that aggressive releases of onion from the buffer have contributed to stability in prices. The Parliamentary Standing Committee on Food, Consumer Affairs and Public Distribution, however, observed that 51582.74 MT of onion was damaged due to spoilage during the years 2019-20 to 2022-21. Damage of such a huge quantity of onion reflects poor management on the part of the Department which has set a target of procurement of 2.5 LMT of onion apart from other essential commodities in 2022-23 budget, the committee's report states. The targets set by the central government for procurement of pulses under PSF are 7.38 LMT of pigeon pea, 3.45 LMT of black gram, 3.18 LMT of gram and 1.00 LMT of red lentil. Assam is among six states which set up the state-level PSF to avail the advance with a corpus of Rs 200 crores with the State Government share of Rs 50 crore. The Central Government released Rs 75 crores of its share of Rs 150 crores and two commodities covered in the state are onion and red lentil. The state has scope to enlarge the list of commodities and effective utilization of central share and timely submission of utilization certificates can facilitate release of more fund under the instrument. The parliamentary panel pointed out that though the utilization of the fund is monitored by the Department of Consumer Affairs, yet the Committee found that many States either do not furnish the utilization certificates or delay submission. The Department, acting on the Committee's recommendation, took proactive steps for strict monitoring of the account statements of the States to make sure due spending on its part and seeking utilization certificates mandatorily from them will ensure optimal utilization of released fund. Apart from providing relief to retail consumers, the PSF mechanism is also beneficial for farmers and producers as listed commodities are to be procured from farmers/farmer's association at the time of harvesting and stored for regulated release during lean season to help bring down their prices. The state government or its agency will be able to procure the targeted quantities only when it has adequate and quality storage to store the procured produce. The PSF management requires effective price monitoring so that spike can be anticipated along the supply chain from farm gate to source markets and timely procurement can be made for calibrated release of the buffer when people need the relief most. Against revised budget estimate of Rs 2250 crores the actual expenditure under PSF in 2021-22 was Rs 2016 crores while estimates for 2022-23 has been reduced to Rs 1500 crores. The central government increasing the PSF corpus and increasing allocation in the Union Budget is critical for the states to enlarge the list of commodities under PSF.